Efficient Greek Estimation in Generic Swap-Rate Market Models

Joshi, Mark S.; Yang, Chao

Download This Paper

Open PDF in Browser

Add Paper to My Library

Efficient Greek Estimation in Generic Swap-Rate Market Models

Algorithmic Finance, Vol. 1, No. 1, 2011

18 Pages Posted: 2 Mar 2011

See all articles by Mark S. Joshi

Mark S. Joshi

University of Melbourne - Centre for Actuarial Studies (deceased)

We first develop an efficient algorithm to compute Deltas of interest rate derivatives for a number of standard market models. The computational complexity of the algorithms is shown to be proportional to the number of rates times the number of factors per step. We then show how to extend the method to efficiently compute Vegas in those market models.

Keywords: algorithmic finance, adjoint method, delta, vega, computational order, market model, Monte Carlo simulation

JEL Classification: G13

Suggested Citation: Suggested Citation

Joshi, Mark and Yang, Chao, Efficient Greek Estimation in Generic Swap-Rate Market Models (March 1, 2011). Algorithmic Finance, Vol. 1, No. 1, 2011, Available at SSRN: https://ssrn.com/abstract=1773942